HUMAN CAPITAL

FORMATION IN
INDIA
Chapter 5
Human Capital and Physical Capital

Human capital refers to the stock of skill, ability, expertie,

education and knowledge in a nation at a point of time.

Physical capital refers to assets which themselves have

been manufactured and are used for production of other
goods and services.
Human Capital vs Physical Capital
Human capital formation:

It is the process of adding to the stock of human capital

over a period of time.
 Sources of Human Capital Formation

● (i) Expenditure on education.

● (ii) Expenditure on health.
● (iii) On the job training.
● (iv) Study programmes for adults.
● (v) Migration and expenditure on information.
 Growth in Government Expenditure on
Education
The percentage of ‘education expenditure of total government expenditure’
indicates the importance of education.The percentage of ‘education expenditure of
GDP’ expresses how much of our income is being committed to the development
of education in the country. During 1952-2012, education expenditure as
percentage of total government expenditure increased from 7.92 to 11.7 and as
percentage of GDP increased from 0.64 to 3.31.

In 2009-10, the per capita education expenditure differs considerably across

states from as high as Rs 12,500 in Himachal Pradesh to as low as Rs 2200 in
Punjab. This leads to differences in educational opportunities and attainments
across states.
Role of Human Capital Formation in Economic
Growth.

● (i) Raises production

● (ii) Change in emotional and physical
environment of growth.
● (iii) Improves quality of life.
● (iv) Raises life expectancy.
● (v) Innovative skills.
● (vi) Raises social justice and equality.
Relationship between human capital and economic growth.
Problems Facing Human Capital Formation in India

● Rising population
● High regional and gender inequality
● Insufficient on the job training in agricultural
sector
● Brain drain
● Deficient manpower planning
● Low academic standards
Important Questions

1. Discuss the need for promoting women’s education in India.

2. Argue in favour of the need for different forms of government
intervention in education and health sectors.
3. In your view, is it essential for the government to regulate the
fee structure in education and health care institutions? If so,
why?
 Human Capital and Human Development

Human capital and human development are related concepts, but

certainly not identical. Human capital is a means to an end. Human
development is an end itself.

Human development is the broader term than human capital.

Human capital considers education and health as a means to increase labour

productivity. Human development is based on the idea that education and health are
integral to human well-being because when people have the ability to read and write
and the ability to lead a long and healthy life, they will be able to make other choices
they value.
Education Still a Challenging Proposition

● Inadequate vocationalisation
● Gender bias
● Low rural access level
● Privatisation
● Low government expenditure on education
Right to Education (RTE)

In the year 2012, the Government of India has brought about an Act,
called RTE. It promises education to all. It makes education a matter of
right to all children in the age group of 6-14 years.

The concept of human capital formation, source of human capital and

its growth is revealed in the chapter. It also deals with the relationship
among human capital, economic growth and human development.
India as a Knowledge Economy

The Indian software industry has been showing an Impressive record over the past
decade. Entrepreneurs, bureaucrats and politicians are now advancing views about
how India can transform itself into a knowledge-based economy by using Information
Technology (IT).

There have been some instances of villagers using e-mail which are cited as examples
of such transformation. Likewise, e-governance is being projected as the way of the
future.

The value of IT depends greatly on the existing level of economic development.

Homework

Write a short note on the topic:

Gender Equity : Better than Before